Hamilton says despite the predictions of slightly higher vacancy rates and slower rent growth, the Detroit office market will remain healthy. Average vacancy rose 1.8% in 2000, due mainly to reduced absorption. Rents grew at a slower pace during the year, but still posted a 7.8% gain.
He said the area is not expected to experience a major downturn once automotive sales begin to cool, for the following reasons:
* The local economy has diversified away from its manufacturing roots.
* Slowing automotive sales will cause manufacturers to increase design and engineering changes to spur sales, creating more demand for office space.
* Any displaced workers will be quickly absorbed into the under-supplied office employment market.
With sales trends, Hamilton said Detroit reached 100 transactions of more than $500,000 in 2000. However, he said with fewer large sales than in past years, total dollar volume has dropped by almost 20% to $700 million.
"As there are 231 buildings currently on the market and real estate investment trusts are likely to become active again, 2001 is anticipated to see a healthy number of sales and more large transactions," he notes.
He says that although small properties comprised the bulk of 2000 sales, values continued to show impressive gains. The average price increased 8% to $110.74 per sf. In general, class A buildings traded for more than $100 per sf, class B for $60 per sf to $90 per sf and class C properties for between $40 per sf and $80 per sf. With prices going the way they are, Detroit should continue its revival,Hamilton predicts.
"Anticipation that suppliers and subcontractors will follow new Downtown firms has led to many older buildings being renovated and updated with telecommunications equipment. The recently renamed Griswold Place will receive $35 million in renovations and the 900,000-sf Penobscot Building will see similar upgrades," Hamilton says.
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